HMRC may have to write off £1.5 billion in unpaid tax

The HMRC issue of unpaid taxes was cast into further disrepute following the revelation that £1.5 billion may have to be written off because the mistakes were made too long ago.

According to the BBC, an inside source has admitted that a vast amount of those affected by the PAYE blunder will not be chased because in many cases the errors were made over two years ago, which means the claims could be challenged in court.

HMRC are currently struggling to get through a backlog of around 7.5 million cases regarding both underpayment and overpayment, spinning out of the PAYE mistake. However with a deficit to clear, government officials will not look kindly on such a large write off.

Earlier this month Exchequer Secretary David Gauke said in Parliament: “In total, the Exchequer is owed approximately £2 billion. Being left with the worst deficit in peacetime history means we simply cannot afford to write off all of these underpayments.”

However the BBC’s source said: “If we had the chance to sort it out three years ago we could have recovered the money. It is now likely to be written off if it's over two years - we're not looking at underpayments beyond two years.”

The backlog has slowly grown due to a number of factors, including the PAYE error and staff cutbacks. A spokesman for HMRC said: “We have said to staff if you find an overpayment to pay it back – we are prioritising vulnerable groups, old age pensioners, low-income groups – the priority is to repay these groups. But while we are reviewing the cases of underpayment, no decision has been made on these cases.”